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The committee is far from settled on any one option — of which Baucus said there are many. Each item, down to the snickerdoodle, has a lobby behind it, paving the way for weeks of horse trading as the committee stitches together a tax package.

A panel of economists presented the committee with a menu of scenarios, from wringing savings out of Medicare and Medicaid to cutting medical costs by reducing sodium levels in packaged foods and at restaurants.

Non-health-related items remain in the mix, including capping the deduction on charitable donations, which received a chilly welcome on Capitol Hill after President Barack Obama proposed it in his budget.

“The proposals that we have discussed,” Baucus said, “will not come easily. The reforms that we are planning are not cheap. ... Finding money that we can all agree on will not be easy.”

Baucus gave one of the clearest signals yet that limiting the tax-free status on employer-based insurance remains a serious option. Obama opposed it during the campaign and repeatedly went after Republican John McCain for making it the centerpiece of his health care plan. Labor unions are also against it.

Yet the idea is attractive because of the money it could generate: $250 billion annually if the deduction was lifted altogether. Baucus insisted a full repeal was not under consideration, but he said lawmakers must look at the deduction.

“I know that there is some controversy around doing so,” Baucus said. “But the current tax exclusion is not perfect. It is regressive. It often leads people to buy more health coverage than they need.”

Six of the 13 witnesses, including economists from the conservative American Enterprise Institute and the liberal Center on Budget Policies and Priorities, argued explicitly for the proposal.

Employer-provided health insurance is considered part of workers’ compensation but is not taxed as wages are. Proponents of eliminating the benefit say it is poorly targeted because it gives the biggest benefit to those with the highest incomes and is unfair because self-employed individuals don’t qualify for the same break. It also encourages individuals to buy gold-plated insurance plans that can drive up health care costs, experts say.

But a warning in the testimony from Gerald Shea of the AFL-CIO underscored why this option will be a thorny issue for Democrats. He said the idea could “disrupt the primary source of health coverage and financing for most Americans.”

Readers' Comments (495)

There appeared to be a bubble of support among the experts for taxing bad behavior, including a $2 tax on a pack of cigarettes and a higher excise tax on alcohol.

What Politico doesn't mention is that the massive federal tax increase on tobacco that was already implemented to fund the expansion of SCHIP earlier this year primarily affects the poor because every study that's been done about smoking shows that the less money someone makes, the more they are likely to be a smoker. Poor smokers who don't pay federal income tax and loved Barry's class warfare rhetoric on the campaign trail are now paying a stealth federal tax that amounts to around $400 per year. That would increase by about $800 with this proposed $2 tax on tobacco to pay for Barry's socialized healthcare plan. Also, these massive sin tax increases never fully fund social programs like SCHIP because (surprise surprise) some people actually decide to quit smoking because they can no longer afford it or just because they don't want more of their money going to the federal government. So that means Barry would run even higher deficits that will result in skyrocketing inflation. By the time Barry's done destroying the economy, we'll look back at the Jimmy Carter years as the good 'ol days.

Good. Considering those who smoke, drink to excess, and have a high intake of fructose tend to rely heavily on healthcare over time, they should be. Cancers, GI diseases, diabetes - so many cases could be avoided (and thus lightening the load on the healthcare system) if people used some common sense and excecuted some good decision making skills.

We have a PAINLESS option alright; GET RID OF THE BEARDED COMMIE GREENSTEIN;THE IDIOT HASNEVER SEEN A TAX THE SENILE FOOL DOES NOT LOVE IF IT IS FOR THE SHIFTLESS LAZY BUMSWHO PAY NO TAXES BUT DO THEY EVER CONSUME WHAT WE SUCKERS HAVE CONFISCATED FROM US

What is wrong with people. Every single item that we eat, drink, or breath should be taxed to pay for the things we need. I think that there should be a tax on air. As an example, a person that is 100 lbs consumes less air than someone that weighs in at 200 lbs. This would give an incentive to lose weight and be more healthy.

We need to tax water, coke, bread, anything that is consumed. We can tax it when it is purchased and when it is consumed and we can have monitors that determine how much we take in. We also need to tax excrement so that fat people pay more tax based on their use of the toilet and the poundage of crap and paper that goes down. It isn't fare to the rest of us that fat people should be able to use so much toilet paper and water and food and air. They should have to pay.

Lastly, there should be a tax on life in general. If you want to live, you should have to pay a monthly life tax and if you fail to pay, then you should be done away with and your wealth distributed fairly. For those people in certain groups that are "desired," the government could subsidize these life payments or pay them as grants. That way, the government could determine who lives and who dies.

To enforce all of this taxing, we need to create a "Civilian Defense Force," equal in and funding to the DoD to ensure that people behave and do the right thing for the collective. I would call this CDF the GassStopObama or "Gastopo" for short. Then and only then can we live in a true utopia that we all deserve!

As usual, the goverment has everyone buying into the lie that people with unhealthy lifestyles are a greater burden as an excuse to raise taxes on them.

The truth is that most of them die far younger than those with healthy lifestyles. They may have large heathcare costs at the end of their lives due to disease but it's nothing compared to those who live into their late 80's and 90's. They typically have 15-20 more years of collecting Social Security, multiple hospitalizations, many years of expesive persciption drugs, back breaking Nursing Home costs, etc.

Moneywise, the smokers, the heavy drinks and those grossly overweight are actually saving us money but because people are ignorant of the truth (and most disagree with their lifestyles) they're easy targets.

We should also tax homosexuals, for the health care issues like HIV, tax abortion, tax politicians for all their toys, tax porno, tax politicians for being elected, tax speeders, tax protest's, tax bad teeth, tax those that have more than two cars, tax people that have boats, double the tax for people with black hair, tax cussing, tax people that wear their pants around their knees, tax plumbers that show their butt crack, tax teenagers that start fights, tax teacher's that don't teach the truth, Tax politicians that lie , (Americans could live on this tax), tax the terrorist, tax illegal alien supporters, double tax "ACORN", triple tax people that don't pay their taxes, in fact if America could just get the democrats to pay their taxes just maybe we wouldn't need to tax bad habits!

As it should be. Raise those taxes. a $5 a pack tax on cigs is just fine

As people quit smoking like me - they will be coming after you to pay for it. As a retired soldier you have healthcare for life. but your going to be paying insurance for illegal immigrants, young people that don't think they need it, and other irresponsible people that decide to have 2 car payments and cell phones instead of taking care of their healthcare. Not to mention government run healthcare will be a disaster, just like Canada and Britain - let the rationing begin. When you grandmother can't get the medical care she needs because she is to old (some government crat decides), are you going to have the money to pay for her care out of pocket? When someone you know has a premature baby and the government decides that babies care will cost to much, are you going to tell their parents sorry I voted for Obama?

Yeah I am carrying the extra weight of Our/YOUR indiscretions! If the states can sue (and Win!) the tobacco companies for their added medical burdens. Lets put a tax on High fructose corn syrup, fast food, and all the High profit goodies that Corporate America lays out for the mindless masses. Let us take the money and load food stamp cards for the poor that only buy fruit and vegitables that are grown locally. (reverse carbon tax).

It's not just the taxes that are going to break us, it is the fees that are imposed by all cities and communities. When President Bush issued the tax rebates, the city and small communities added fees and raised taxes to the point that it took more than Mr. Bush had given us. It is time to do away with all aide to illegals, cut wages and perks given to politicians and improve the river walk in San Antonio southward to the point that illegals could take a boat ride back to the boarder. When they get there, tax them for the ride. Stop printing any and all government documents in any language other than English and just print in black ink to save the cost of colored flowery designs. TIME TO TAX THE POLITICIANS THAT DON'T DO THE JOB THEY HAVE BEEN ELECTED TO DO AND THEN BOOT THEM OUT OF OFFICE.

When are the American people going to stand up and say enough, we spend more than enough on our Government, they need to cut spending, and waste, and not just keep taxing us more. Even my 8 yr old knows, if you don't have the money for something you either cut expences, or you find something else that works as well. Our Government, "Both " parties need to be put on a budget, and it needs to start on a local level. Keep voting the encumbents out untill they all get the message, stop feeding Government, and start feeding your children.